Allocating your assets is one of the most important choices you will make as an investor. This video explains what this means – and why it’s important.
Our financial advice can help you choose an asset allocation that is right for your goals, time horizons and risk tolerance.
5 years research. 5 million Vanguard families. What we learn every day about the financial preferences of Americans can help you move forward with confidence in the world of investing. Let’s start with one of the first and most important decisions you make when starting your investment: allocating your assets.
Investment comes in 3 basic flavors: stocks, bonds and cash. You can combine these flavors to create all kinds of interesting investments, but the basic ingredients are always the same.
Your asset allocation is how much money you want in your portfolio to be represented by each of these tastes. Maybe you are a 40% stock, 60% bond type person. Or maybe 20% stock, 50% bond, 30% cash is your speed. Everyone’s mix is different, and it all depends on your goals, time horizon and risk tolerance.
If you see risk as a spectrum, stocks are at the upper end, bonds are at the middle and cash is at the lower end. So a stock-heavy portfolio is more risky than a bond- or cash-heavy portfolio.
Most people recognize the dangers of taking too much investment risk, but it turns out, not being acceptedEnoughRisk can be just as problematic – even if you don’t lose a lot of money, you can do less, and your investment may not keep up with inflation.
You want the risk level of your portfolio to allow you to increase your money so that you do not incur large losses in a market downturn. It’s all about finding balance.
Your investment choices are personal. There is no “right” or “wrong” way to create a portfolio – just right or wrong for you. A great way to start establishing your goals, deadlines and risk tolerance. Visit us at vanguard.com/AssetAllocation to learn more.
Please note that all investments involve some risk. Be aware that fluctuations in financial markets and other factors can reduce the value of your account.
There is no guarantee that any specific asset allocation or combination of funds will meet your investment objectives or give you a certain income level.
Investing in bonds is subject to interest rates, credit and inflation risk.
Diversity does not guarantee gain or protect from loss.